Italy’s retail sales and consumer confidence are in sync or
perhaps I should say ‘in sink’, since sinking it what they are both
doing.

Italy’s retail sales in real terms are falling at a 5.1%
annual rate in 2008-Q1, that is one month into the new quarter. In
April real sales fell by 0.2% while nominal sales were flat. Yr/Yr real
retail sales are off by 0.9%.

In general consumer data in the Zone have been weak and the
industrial data have been relatively stronger. Normally with such weak
consumer data we would be staring straight at recession. In this
business cycle it is still not clear that recession is either
inevitable or avoidable. Among the large EMU countries Italy has been
the weakest. Conditions in the Zone remain touch and go with problems
that span construction, a strong euro exchange rate, financial turmoil
and the dual and opposite depressing and inflation-making impact of
high oil prices.